Basic Pension Info

mikewp

Hi, I need a little help- I am just about to retire early (59) and I currently have a Final Salary Pension ( 29 years service) that I can cash in early but looking at the figures I believe I can get better value by transferring, I have had the transfer value figure and need to move forward and be in a position whereby all is in place for start of April.
I do intend to proceed with a Registered IFA who has permission to advise on final salary pensions but I would like to know a bit more before I get to that stage. I am also aware that the pension needs to be transferred to a personal pension provider. Who else needs to be involved ? How do I keep the money safe ? who controls it along the way ? what are the pitfalls ? I am keen that the money is not put at risk and even more keen that it is safe from grubby paws. It seems to me that it is a bit of a free for all out there with the wolves lining up.

Any help would be much appreciated.

macca1974

with a final salary scheme, you will have built up a guaranteed benefit and have a guaranteed income for life. most of the time, you would be better off with the final salary scheme rather than transferring it (i think 9/10 times is usually quoted on here).

The things that you need to consider are quite complicated and will depend on the scheme, your family situation, your health, your other assets and income, your income needs in retirement, the type of scheme that you had, the transfer value being offered by your scheme, any penalties that there might be for taking your pension early to name but a few.

If you were full time, 29 years of service is going to have built up a really good pension (say around half of your income depending on the scheme). An escalating pension of £3K a year can cost upwards of £100K for a 60 yr old, so your fund might be considerable.

Personally, I would suggest as you have said going to a good IFA and being willing to pay a fee for an unbiased report of all of your options. It might cost a bit, but it might also stop you from making an expensive mistake.

dunstonh

How do I keep the money safe ?

Safest option is to leave it in the defined benefit scheme and take the benefits from that scheme.

what are the pitfalls ?

Transferring out of a defined benefit scheme is best in around 1 in 10 cases. So, the odds are against you.

Your reference to keeping it safe is a concern as the critical yield required to beat defined benefit scheme is likely to be more of the adventurous investor level. Not someone asking about safety.

I am keen that the money is not put at risk and even more keen that it is safe from grubby paws.

Again, points towards keeping it.

It seems to me that it is a bit of a free for all out there with the wolves lining up.

yes. plenty of scams happy to take money off you and plenty of fools planning to leave excellent schemes to go into plans with poorer terms.

mikewp

macca1974 wrote: »

with a final salary scheme, you will have built up a guaranteed benefit and have a guaranteed income for life. most of the time, you would be better off with the final salary scheme rather than transferring it (i think 9/10 times is usually quoted on here).

The things that you need to consider are quite complicated and will depend on the scheme, your family situation, your health, your other assets and income, your income needs in retirement, the type of scheme that you had, the transfer value being offered by your scheme, any penalties that there might be for taking your pension early to name but a few.

If you were full time, 29 years of service is going to have built up a really good pension (say around half of your income depending on the scheme). An escalating pension of £3K a year can cost upwards of £100K for a 60 yr old, so your fund might be considerable.

Personally, I would suggest as you have said going to a good IFA and being willing to pay a fee for an unbiased report of all of your options. It might cost a bit, but it might also stop you from making an expensive mistake.

Thanks for your response, yes my fund is substantial (imo) and of course if I take the safe option (final salary) I am acutely aware that should anything happen to me or the stability of the final salary scheme the the pot would promptly disappear as where with the new rules the pot will stay with the family. By transferring I should be able to beat the income from the FSP, all penalties form part of my calculations. You are clearly very knowledgeable on the subject do you know the answer to my queries regarding who needs to be involved and how to keep the money safe from fraud, thank you

mikewp

dunstonh wrote: »

Safest option is to leave it in the defined benefit scheme and take the benefits from that scheme.



Transferring out of a defined benefit scheme is only around in around 1 in 10 cases. So, the odds are against you.

Your reference to keeping it safe is a concern as the critical yield required to beat defined benefit scheme is likely to be more of the adventurous investor level. Not someone asking about safety.


Again, points towards keeping it.



yes. plenty of scams happy to take money off you and plenty of fools planning to leave excellent schemes to go into plans with poorer terms.

Thank you for your response, yes I understand that is the safe option providing that I keep in good health as well as the FSP fund. Should this not be the case then the pot pretty much disappears anyway apart from widow pension and 85K protection.The new rules keep the pot within the family and from my homework so far I think I can match the income from the FSP, so it's off to the IFA, thanks again

jem16

mikewp wrote: »

Thanks for your response, yes my fund is substantial (imo) and of course if I take the safe option (final salary) I am acutely aware that should anything happen to me or the stability of the final salary scheme the the pot would promptly disappear as where with the new rules the pot will stay with the family.

Should anything happen to you, there will be a widow's pension - are you married?

if anything happens to the fund the Pension protection Fund is there for that purpose.

http://www.pensionprotectionfund.org.uk/Pages/homepage.aspx

By transferring I should be able to beat the income from the FSP, all penalties form part of my calculations.

What calculations are you basing this on?

What transfer value have you been given and what will you get by staying with the DB pension?

Thank you for your response, yes I understand that is the safe option providing that I keep in good health as well as the FSP fund.

Statistically most people live long enough and in good health to enjoy an index-linked final salary pension. Have you any health issues that would make sense to transfer out?

Should this not be the case then the pot pretty much disappears anyway apart from widow pension and 85K protection.

There is no pot in a final salary scheme. There is a prescribed guaranteed set of benefits which pay out no matter what. As there is no pot and nothing is invested £85k protection doesn't enter into it.

I'm not sure you really understand what you are thinking of doing and why you feel you would be the 1/10 to benefit from such a move.

Triumph13

mikewp wrote: »

from my homework so far I think I can match the income from the FSP

I too would be very interested to see your calculations to support that as that would be very unusual indeed. Are you taking inflation into account?
As others have said, the 85k rule is for bank accounts. For final salary pensions the govt backstop covers 90% of your pension up to a fairly high cap so unless you have a very big pension that shouldn't be an issue.
I know you want people to stop going on about this and answer your questions, but unless you are in poor health then statistically you are very unlikely to be making the right decision.
If you give us the numbers to show that you really are being offered an incredibly generous transfer value and that it does make sense to transfer your pension then everyone will be very happy to congratulate you on your good fortune and give whatever advice they can about how to proceed. In the meantime though everyone's default assumption is going to be that you are in danger of making a big mistake.

xylophone

As the OP is seeing an IFA qualified in Pension Transfers, presumably he will be advised as to the wisdom (or not), of transferring out?

kidmugsy

mikewp wrote: »

. Should this not be the case then the pot pretty much disappears anyway ...The new rules keep the pot within the family

Oh for heaven's sake just buy some life insurance.

jamesd

You don't need to do anything special to protect the money. It'll be transferred between the two pension schemes, quite possibly by a cheque in the normal post.

One thing to consider when it comes to guaranteed income is deferring the state pension when you get to that age. The 5.8% increase in state pension per year of deferral is quite interesting given that it's both index-lined and higher than the long term UK stock market performance.

Beyond that, around 4% of the capital value is often given as the sort of safe withdrawing rate from a pension pot. Later in life, perhaps in your early to mid 80s, you might find that spending some money on annuities becomes a better deal than investing, providing desired income with less drain on capital than just using drawdown itself with the same amount of money.

TH1878

mikewp wrote: »

By transferring I should be able to beat the income from the FSP, all penalties form part of my calculations. You are clearly very knowledgeable on the subject do you know the answer to my queries regarding who needs to be involved and how to keep the money safe from fraud, thank you

Fraud is the least of your worries. Miscalculation and neglecting to factor in the effect of pound cost ravaging is much more likely to have a bigger effect.

Why don't you post your calculations and we can see if you've missed anything?